States will be given wide latitude to decide what “essential benefits” insurers must offer in their health policies come 2014, the Obama administration said Friday in a move that pushes off final federal rules on the topic until an unspecified date.
Essential benefits, which must be offered by insurers in most policies sold to individuals and small businesses, are one of the key flash points in the federal health law. Patient advocates have called for a broad national standard covering a wide range of treatments, while business groups have said affordability must be a top consideration, even if it means a more limited package.
The long-awaited guidance gives states four choices for designing a benchmark insurance package. Regulators can base their package on the benefits offered by: one of the three largest state employee health plans (by enrollment); one of the three largest federal employee health plan options; the largest HMO plan offered in the state or one of the three largest small-group plans in the state.
Health and Human Services Secretary Kathleen Sebelius said the plan shows how the Obama administration intends to move forward – and reflects its commitment to giving states flexibility.
“Coverage that works in Florida may not work in Nebraska, so this approach allows states to tailor their package to the needs of their own residents,” said Sebelius, who did not give any specific examples of differences in the medical treatments that might be needed by residents of one state versus another.
The guidance may well please states, which wanted maximum flexibility, but it disappointed some patient advocates. And it continues the uncertainty faced by insurers, consumers and employers over exactly what will be covered in the essential benefit package.
“We wanted a strong national standard, not a lot of variability state-to-state,” said Ryan Clary, director of public policy for Project Inform, a San Francisco-based group that advocates for people with HIV/AIDS. “My understanding is that some state employee plans are pretty weak and if benefits are tied to that, it might lead to weak insurance plans.”
All insurance plans sold to individuals and small businesses will have to cover items and services in a minimum of 10 categories defined by the 2010 law, including preventive care, emergency services, pediatric care, including oral and vision care, maternity care, hospital and physician services, and prescription drugs. Self-insured employers are exempt from the essential benefit requirement, but most large employer plans already cover those 10 broad categories.
Outside the 10 categories, the law leaves specifics up to the regulators who design the essential benefit package. Those might include particular treatments that will be covered or restrictions on such things as the number of office visits, drugs or services that will be covered. The federal law restricts annual dollar limits on coverage and bars lifetime dollar limits.
States that don’t choose one of the four options for defining an essential benefits package will have one selected for them by federal regulators, who plan to use the benefits offered by the small-group plan with the largest enrollment in the state.
Friday’s guidance covers only the benefits that must be offered in each state. Rules to be released later will address other aspects of coverage, such as deductibles and copayments for office visits, drugs and other services.
Rather than issue a proposed regulation, the administration chose to advise the states through a bulletin. That does not have the force of law, but neither can it be quashed by Congress, as could a rule. By putting out the choices as a form of guidance, the administration also does not have to provide definitive economic estimates of the proposal or determine its regulatory impact on small businesses.
“Now, no one can say they put out a rule that costs umpteen billion dollars, but they floated something [to give states an idea of what to expect],” said Robert Laszewski, a former insurance executive and head of the consulting firm Health Policy and Strategy Associates in Alexandria, Va.
States need to develop the essential benefit packages as part of their work to establish online insurance marketplaces, called exchanges, set to open in 2014. In addition, states need to know the scope of the coverage because they must pay the cost of any medical services their laws mandate that go beyond the essential benefits called for in the federal law. That provision has led advocates to fear that state-mandated services such as autism treatments, acupuncture or chiropractic care, might be rolled back in some states.
However, the bulletin issued Friday gives states an out if they choose to base their benchmark benefit package based on either a state employee policy or a small-business plan, since most of those already cover all state-mandated medical services.
Friday’s bulletin “helps to make it possible to preserve important existing state benefit requirements,” said Ron Pollack, executive director of the left-leaning consumer advocacy group Families USA.
Criticism of the bulletin came from the Senate Republican Policy Committee, which said the ability of states to choose benefit packages that include a wide range of state mandates will further fuel the cost to policyholders and taxpayers.
“States can choose to mandate an extremely rich benefit package … and the costs will be foisted on federal taxpayers funding insurance subsidies in that state,” said a written statement from Chris Jacobs, health policy analyst for the committee.
The American Cancer Society, Cancer Action Network issued a cautiously optimistic response to the guidance, saying if states choose the federal employee plan benefit package, “people with cancer and their families” are likely to fare well. But it said the quality of coverage patients receive under the three other options is less certain.
"We urge states to choose a benchmark plan that provides the best care for someone at risk for a life-threatening chronic disease such as cancer …” said Stephen Finan, senior director of policy at the network.